Tax give-away on Monday

I shall be tuning in to the Statement on Monday afternoon but suspect the news will not be good and that the Chancellor will make some daft decisions, based on his boss’s criteria.

For example, it will probably be tied up in red tape so that it can be channelled to the poorest. Personally I have no problem with that, other than for the red tape!

But it will not do what the government want. It is obvious (to me) that the people most in debt are the poorest in society, many of whom have incurred large credit card debts and, those lucky enough to own their own homes, high mortgage debts. These people are extremely worried and will want to cut down their debt, and more importantly, their interest charges. They will, on the whole, use the rebate to pay off some of their debts. So people won’t go out and “spend for England”. Rather they will sit at home and “save for their families”.

As I said, I have no problem with that. But, if I were the Prime Minister and desperately needed to stimulate the economy, I would give the rebate to the better off who would be more likely to “spend for England”.

There is also talk about lowering the VAT rate for a token period. This will not stimulate the economy enough, unless the decision is made to really reduce the VAT down to 5%. 10% may stimulate a little but I really cannot imagine a reduction of more than 2.5% or at the most 5%. The government just doesn’t have enough imagination.

The main underlying problem is that nobody is addressing the root cause of our monetary problems. Everything is based on Keynesian Economics. This just doesn’t work and there will be heartbreak for decades to come if we continue along this dangerous path.

I am a firm believer of Hayek Economics which is a stalwart of the Austrian School of Economics. This school, since WW2, has been based in the United States of America. They don’t believe in printing money, or increasing the National Debt at every little opportunity. To switch over to Haydek now would admittedly cause hardships, but would put our country on the right path so that we would all benefit in the longer term.

What school do you belong to? If you have no credit card debt, or indeed any other debt other than a mortgage which, when taken out, was for an amount with repayments no higher than you could easily repay, you might probably follow Hayek. However, if you are ladened down with debt, or haven’t yet realised the king is naked, you could well favour the Keynesian school.


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